PRAGUE: Czech lender Komercni Banka cut its loan growth outlook on Friday as it faces a slowdown in business lending while market competition eats into margins. The third largest Czech bank’s attributable net profit fell by a lower-than-expected 10.6 percent to 3.53 billion crowns ($160.37 million) in the third quarter. The result was buoyed by the release of loan provisions that helped offset a fall in banking income. A drop in profit had been expected after the bank booked an extraordinary gain a year ago for the sale of a majority stake in a subsidiary.
The Czech economy has been growing fast and unemployment is the lowest in the European Union. The central bank raised interest rates in August, ending an almost five-year period at near zero. But the impact on banks is being delayed as lending competition has become tougher. Firms are also increasingly financing in euros, a consequence of the central bank keeping the crown in a currency cap for several years until April. Komercni Banka, majority owned by France’s Societe Generale , has taken a more cautious approach to the rise of lending in foreign currency. “The balance sheets of Czech banks have swollen. Czech businesses have increasingly been funded in euros while they leave Czech currency in local banks,” Chief Executive Jan Juchelka said. “The competition to deploy the excessive liquidity in Czech crowns has intensified.” The bank reported loan volume growth slowed to 2.0 percent in the first nine months of the year, with loans to businesses declining 2.8 percent.
The bank cut its full-year outlook to mid-single digit growth, from a previous view of mid- to high-single digits, a move the chief financial officer had flagged to Reuters in September. At the same time, deposits grew almost 10 percent in the nine-month period and the bank said full-year growth would be higher than that before decelerating next year. Czech banks have weathered the global financial and economic crisis in the past decade and stayed profitable in the long period of loose monetary policy. Komercni Banka reported capital adequacy of 16.8 percent, which will be reinforced by another 58 basis points in the fourth quarter after the bank took a 100 million euro subordinated debt from its parent. On Friday, it also confirmed its aim to pay 60 percent of 2017 recurring net profit in dividend. Komercni Banka shares fell 0.6 percent on Friday, hitting the lowest level since July.
